European Insurance: Love Actuary #215 - More capital coming into the reinsurance market would likely to lead to further softening

In this week's Love Actuary, we examine the topic of reinsurance capital. As we get ever closer to the 1st January reinsurance renewals, it seems almost inevitable at this stage that pricing will fall with strong profitability and a benign loss environment contributing to an extraordinarily good period for returns. Whilst we believe that new capital to the industry will be relatively disciplined, we see it as an additional reason that reinsurance pricing will likely remain weak heading into 2027. We recently became more negative on reinsurance with Hannover Re and Swiss Re both rated UW and Munich Re and SCOR N. Growth in capital has outstripped demand. Aon estimates that there is $800bn of capital supporting the reinsurance industry, up almost 40% from the $575bn total at FY22 prior to the market hardening in early 2023. Since the end of 2023, traditional capital has increased by over $90bn, while alternative capital has grown more than 50% since 2022 and doubled in size since 2015. G